Exploring Human Potential

Canada vs. U.S. Health Care: State Governance and Next Steps if Ryan Fails.

Posted on | March 15, 2017 | 2 Comments

Mike Magee

One of the most enduring myths that we Americans support when it comes to Canadian health care is that it is a nationally run, monolithic offering with little variability. That is patently false.

In fact, Canada’s official beginnings in health governance began in the province of Saskatchewan in 1946.  For several decades they had been struggling to improve access to medical care, and then took their learnings and passed the Saskatchewan Hospitalization Act that provided universal coverage for hospital care to its citizens. Four years later, the province of Alberta followed suit with a public health plan that eventually covered medical services for 90% of its population.

In 1957, the national government upped the ante by offering to cover 50% of the cost of health care to provinces and territories that embraced their Hospital Insurance and Diagnostic Services Act, which eventually formed the pillars of the current Canada Health Act. By 1961, all ten provinces were aboard, and surprisingly controlled their own budgeting, priority setting, licensing, and provider participation within their territories. The national government set the mission and vision and agreed to pay part of the bill as well as administer the insurance details of the program. But the provinces did the rest.

In doing so, Canada traded control and systematic predictability for local support, involvement, and sustainability. What happened over the next few decades in terms of cost sharing, governance and variability well informs the current raging debate over replacement of Obamacare, and especially the fate of Medicaid in the U.S.

First the finances. To begin with, Canada never agreed to pay the entire health care bill for its citizens. In fact, national and provincial governments pay about 70% of the bill, and coverage is excluded for pharmaceuticals (although nationally negotiatated pricing puts their cost at roughly ½ to 2/3 of ours), dentistry, and optometry. The remaining 30% falls on Canadian’s shoulders, covered either by private supplemental plans or out of pocket.

Of the portion the government does pay, the original deal was that this would be a 50/50 split. But as in the U.S. after the institution of Medicare and Medicaid, costs rapidly escalated. Within a few years, the national government retreated to block grants, making these a line item in their budget. In the years that followed they first trimmed this line by 5% and later by 30%. The net effect was to alter the 50/50 bargain to 30/70, and finally to 15/85 today.

The individual provinces and territories then primarily control the decisions and most of the cost burden of their programs. There is considerable variability. In cost for example, Alberta pays roughly 20% more per capita than Quebec. In governance, some use province wide boards, and others rely on local hospital boards. And in outcomes, performance varies widely. Such is the price of a distributive system.

What is uniform however, is that all Canadians have coverage of the 70%, and this is provided through a single insurance plan administered by Canada itself. By doing this, Canada reinforces a national vision and basic access to services for all its citizens. As important, it eliminates some of the cost-shifting and payor-mix selection problems that have plagued the U.S. private insurer based model from the beginning. Stated plainly, we need charity care because: 1) Someone doesn’t have insurance, or/and 2) Someone has lousy insurance, or/and 3) doctors and hospital leave the poor and vulnerable in the lurch.

When President Obama chose the course he chose for the ACA, and Governor Romney chose the course he chose for Massachusetts, both were following, in part, the Canadian playbook. The starting point for both was, as in Saskatchewan, coverage. Broad participation by all would be necessary. The costs of the old and sick, needed to be counter-balanced by the contributions of the young and well. Both chose to use carrots and sticks to empower their mandates.

Massachusetts had the opportunity to adjust and fine-tune theirs. Obama, in the face of 8 years of determined and relentless opposition to kill his signature program, was never afforded the same opportunity. Specifically, 19 states not only didn’t stay neutral, they went nuclear. Many sat on their hands rather than work on state exchanges. 19 refused what became a 100/0 deal to cover cost of expansion of Medicaid. Remarkably, 20 million Americans still participated. Both legs of the program, as in Canada, embraced local control, and were provided a relatively free hand. For example, appeals for experimental models, as with Arkansas’s use of private insurers for Medicaid, were given a green light and proved successful, in part because it shielded and protected their poor and vulnerable citizens from discrimination by local providers.

But that was then and this is now. Paul Ryan’s plan, including caps on Medicaid,  has run into stiff Republican head wins. This is not because the CBO (which they preemptively undermined) believes 24 million will ultimately be uncovered as they once again arrive in desperation on ED doorsteps across the nation (the good old days.) Rather its because analysts, with near uniformity, are predicting disaster – especially for the rural and elderly poor who figured prominently in their own and Trump’s election.

So what should we do?

As in Canada, we need to embrace local support, involvement, and sustainability. That means dealing the states in, but remaining united.

We do need a mandate. All citizens must contribute up to their means. This means fine-tuning the incentives so that people, especially young people, act.

We also need to help fund our health programs with graduated taxes on our most wealthy. Income disparity is now the greatest threat to our democracy. Supporting national health helps spread the wealth in more ways then one.

We need to build on the Medicaid success, and continue to support state waivers in the interest of openness and experimentation.

We should not move to block grants. That just passes the buck.  Instead let’s work with state leaders to incentivize the creation of compassionate financial brakes on the system. We are all in this together, and we’ve proven that some states, if left in the darkness, will tolerate great suffering of their people rather than share resources or responsibility.

We need to be confident that many of the 19 state hold-outs will now choose to participate. If they do not, we need a back-up plan that does not depend on the largess of private insurers.

We need to call the private insurers bluff. They want to get out of the business. Fine. Get our best national and state public health financial people on the first plane to Canada, and figure out what they did to make Canada the top payer. If our private insurers wilt, we will have gained resources not lost them.



2 Responses to “Canada vs. U.S. Health Care: State Governance and Next Steps if Ryan Fails.”

  1. Susan Pellerin
    March 15th, 2017 @ 4:18 pm

    Dr. Magee: Thank you for this succinct healthcare history. Hopefully, some of the more stubborn members of the US congress will read, learn and act with courage. Unfortunately or maybe fortunately, we,the people will need to read, learn and act with more courage.

  2. Mike Magee
    March 15th, 2017 @ 4:24 pm

    Thanks, Susan. We are truly testing our democratic institutions.

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